Posts tagged ‘Adriana Resources Inc (ADI)’

A feasibility study into a third Quebec railway to the Labrador Trough is back on track, according to October 21 announcements from Champion Iron TSX:CIA and Adriana Resources TSXV:ADI. The companies have joined the Quebec government in a new entity called la Société ferroviaire du Nord québécois, société en commandite (SFNQ) to oversee the technical and economic report.

The news follows a bill tabled by the provincial Liberals on September 30 to revive Plan Nord, the massive infrastructure program that had been sidelined by the former Parti Quebecois government. The province now intends to create la Société du Plan Nord to co-ordinate development beyond the 49th Parallel, with $63 million budgeted for this year and up to $2 billion by 2035. The bill allocates a $50-million investment in Gaz Métro LNG to expand production and storage of liquefied natural gas, which would be trucked to Stornoway Diamond’s (TSX:SWY) Renard mine, scheduled to open in 2016. LNG transport to other projects would follow.

Quebec will provide up to $20 million for the feasibility. But the companies’ contributions are less clear. Adriana’s late afternoon announcement didn’t specify a contribution. The company takes part through its Lac Otelnuk joint venture, held 40% by Adriana and 60% by Hong Kong-based WISCO International Resources Development & Investment. Champion listed its share as sunk costs valued up to $6 million. That company takes part through its now wholly owned subsidiary, Champion Iron Mines Ltd.

As a separate company in 2013, Champion Iron Mines failed to find private and public backers for a 310-kilometre rail connection between the southern Trough and the deep sea port of Sept-Iles that was expected to cost $1.33 billion. Earlier that year CN TSX:CNR suspended its feasibility study on an estimated $5-billion, 800-kilometre link to the same port.

Currently two railways connect Sept-Iles with the resource-rich region straddling the Labrador border. The Quebec North Shore and Labrador Railway runs a 415-kilometre route to Labrador City. A private line operated by an ArcelorMittal subsidiary serves its Mont-Wright operation.

Other companies have been invited to take part in the feasibility study, which would envision a common carrier.

Among noteworthy aspects of Plan Nord is the government’s confidence that future commodity markets will justify large-scale investment—and that Quebec sometimes prefers to invest in, rather than subsidize, industry. Apart from Gaz Métro, the government’s Investissement Québec unit sees opportunities in a number of ventures including Stornoway, in which the province is acquiring an approximately 29% stake.

If metallurgy is crucial to rare earths, Commerce Resources TSXV:CCE has positive news as it moves its Ashram deposit towards pre-feasibility. Lab results announced August 19 for the northern Quebec project once again show it can produce a total concentrate of rare earth oxides grading over 40% using standard industry techniques. In doing so the project so far exceeds a baseline level of at least 30% TREO concentrate met by all major rare earth element mines outside southern China.

As pre-feas approaches, Commerce Resources has infill drilling and metallurgical tests underway for its Ashram project in northern Quebec.

A test produced concentrate of 41% TREO at 70% recovery, effectively repeating a similar accomplishment in December 2013 that produced a 44% TREO concentrate at 71% recovery.

The results show “one of the highest-grade mineral concentrates in the REE sector and we believe that our current results are the most logical indicators of Ashram’s potential for positive downstream economics,” stated Commerce president Dave Hodge. “We look forward to the results from the next phase of metallurgical testing and to a better definition of our costs to produce final end products.”

Among the advantages, the high grade simplifies downstream processing. The tests suggest only about 3% of the rock extracted from Ashram would require hydro-metallurgical work, cutting the project’s capital and operating costs.

Commerce sees significant potential for further recovery through optimization of factors like temperature, pH and reagent dosage.

The company now plans studies to produce a concentrate of mixed rare earth carbonates free of thorium. The plan would separate cerenium and lanthium as potential products in themselves and increase the value of a rare earth oxide/rare earth carbonate concentrate that Commerce describes as the basic feedstock for REE separation facilities in and out of China.

Achieving that goal could attract joint venture interest from companies that “have excess separation capacity and need a concentrate source.”

Among other objectives, Commerce “expects to evaluate the production of a range of separated oxide products, with a focus on the five critical REOs (CREOs) that the Ashram deposit is enriched in.”

The project’s 2012 preliminary economic assessment showed quantities of the CREOs neodymium, europium, terbium, dysprosium and yttrium “unusual in carbonatite deposits and especially those of such tonnage and grade.”

That resource used a cutoff of 1.25% total rare earth oxides to estimate a measured and indicated 29.3 million tonnes averaging 1.9% TREO. The inferred category showed 219.8 million tonnes averaging 1.88% TREO. This year’s summer/fall agenda has 1,000 to 1,500 metres of delineation drilling planned to follow up on last winter’s positive results.

The Ashram deposit forms part of the 19,000-hectare Eldor property in the Labrador Trough, about 80 kilometres north of Lac Otelnuk, the “largest iron ore deposit in Canada with the potential of becoming one of the largest in the world,” according to Adriana Resources TSXV:ADI. Lac Otelnuk has feasibility scheduled for completion by year-end. Commerce has also released a PEA for its Upper Fir tantalum-niobium deposit in southeastern British Columbia.

On schedule and under budget, winter-spring drilling at Commerce Resources’ (TSXV:CCE) Ashram deposit in northern Quebec wrapped up last week, bringing one of the world’s largest rare earth projects closer to pre-feasibility. Ashram advances at a time when China’s “costs of producing ‘cheap’ rare earths are becoming increasingly unsustainable in terms of the environment, the availability of reserves, the health of its communities and the political ramifications,” according to a 28-page report by Secutor Capital Management. The study adds that China “is beginning to worry about its own domestic supply, as China is its own biggest customer.”

The Ashram deposit makes Commerce Resources “one of the most advanced REE juniors in regards to metallurgy which, in the REE space, is everything,” according to a report by Secutor Capital Management.

That puts an interesting perspective on Commerce, “one of the most advanced REE juniors in regards to metallurgy which, in the REE space, is everything,” Secutor analysts Arie Papernick and Lilliana Paoletti stated. “The Ashram project hosts a substantial resource with a well-balanced rare earth oxide (REO) distribution. The deposit is enriched in light and heavy rare earths, including all five of the critical elements. The mineralogy is simple due to the presence of the minerals monazite, bastnaesite and xenotime, which currently dominate commercial processing. Unlike many of its competitors, Commerce is able to produce a 43.6% total rare earth oxide (TREO) mineral concentrate due to the deposit’s simple mineralogy, allowing significant cost reductions.”

According to Ashram’s 2012 preliminary economic assessment, the extent of those critical elements—neodymium, europium, terbium, dysprosium and yttrium—is “unusual in carbonatite deposits and especially those of such tonnage and grade.”

That resource used a cutoff of 1.25% total rare earth oxide to estimate a measured and indicated 29.3 million tonnes averaging 1.9% TREO, and an inferred 219.8 million tonnes averaging 1.88% TREO.

As the Secutor report emphasized, “REE mineralization is virtually completely contained within the minerals monazite, bastnaesite and xenotime, allowing Commerce Resources to use standard processing techniques. In the REE industry, the ability to use conventional metallurgy and processing is rather unique. Only four REE-bearing minerals out of over 200 have ever supplied the market in a material fashion. These four minerals currently, and historically, dominate commercial REE processing and are host to the REEs at Ashram.”

The 43.6% TREO concentrate, at a recovery of 70.7%, comprises “one of the highest-grade REE mineral concentrates which we are aware of produced by a junior mining company globally.”

It’s considerably higher than that of Ashram’s 2012 PEA, which anticipated reaching a target of 20% TREO at a recovery of 60% to 70% “through an established and commercially proven technology.” Yet the PEA’s base case considered a concentrate grading 10% TREO at 70% recovery.

In the REE industry, the ability to use conventional metallurgy and processing is rather unique.—Secutor Capital Management analysts Arie Papernick and Lilliana Paoletti

The study used a 10% discount rate to project Ashram’s pre-tax, pre-finance net present value at $2.32 billion and a 44% internal rate of return. The capex, including contingency, came to $763 million with payback in 2.25 years. The PEA envisioned a 4,000-tonne-per-day open pit operating for 25 years—based on just 15% of the total resource.

The higher-grade concentrate, with its capex and opex ramifications, is just one of the reasons analysts Papernick and Paoletti see a potentially more impressive pre-feas. Ashram’s infrastructure costs might benefit from proximity to the Lac Otelnuk iron project, 80 kilometres south. A joint venture of Adriana Resources TSXV:ADI and WISCO International Resources Development & Investment, it’s the “largest iron ore deposit in Canada with the potential of becoming one of the largest in the world,” according to Adriana. The project’s 2011 PEA calculated a $12.9-billion capex which included power and, via the link at Schefferville 165 kilometres southeast, railway to the deep sea port of Sept-Iles. Since then the Quebec government has indicated it will only permit a multi-user rail service.

Lac Otelnuk has full feasibility scheduled for completion by year-end.

The Labrador Trough might hold some of the world’s largest undeveloped iron ore resources. But is the market ready? That’s a question some people are asking as CN TSX:CNR shelves a feasibility study to build what might have been a $5-billion, 800-kilometre rail line to the isolated Quebec/Labrador iron ore range.

CN formally announced the decision February 12, citing “current market realities.” The rail giant added that “mine construction schedules and diverging needs for each specific individual project will make it difficult to obtain the critical volumes of iron ore necessary.” Also a factor was “the decision by some miners in the region not to join the group of mining companies supporting the CN infrastructure project.” The study was originally scheduled for release in May.

This Adriana Resources map shows the company’s Lac Otelnuk project, the Labrador Trough and two existing railways, Cartier to the west and QNS&L to the east. The latter route now terminates at Labrador City, not Schefferville.

It began last August under a partnership of the continental railway, pension/insurance fund manager Caisse de depot et placement du Quebec and a group of mining companies.

In separate February 12 announcements, two of those companies announced they were unaffected by the suspension. Referring to its Taconite project straddling the Quebec/Labrador border, New Millennium Iron TSX:NML stated the “base case for product transportation is through a ferroduct and does not depend on a new rail line.”

The project’s KeMag deposit pre-feas suggests pumping concentrate along a 700-kilometre slurry ferroduct to the St. Lawrence port of Sept-Iles. “Slurry transportation is being used in many iron ore projects located in Brazil, India and Australia because of its low-cost advantage compared to rail transportation,” the company states. “This has the potential to make KeMag the lowest-cost pellet producer in North America.”

Another CN partner, Alderon Iron Ore TSX:ADV stated its Kami project “feasibility study capital and operating cost projections are based on using the [Quebec North Shore and Labrador] Railway.”

The region also has a second, private rail line operated by the Cartier Railway Company, a subsidiary of ArcelorMittal. The 420-kilometre route connects the company’s Mont-Wright operation with Sept-Iles.

The 415-kilometre QNS&L Railway links Labrador City with Sept-Iles. Although it’s owned by the Iron Ore Company of Canada (itself owned 58.7% by Rio Tinto and 26.2% by Mitsubishi), Alderon president/CEO Tayfun Eldem emphasized that the QNS&L is “a common carrier that operates with the legal obligation to accommodate third-party traffic. It currently has ample surplus capacity and runs within 15 kilometres of the Kami property.”